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Later, the district court approved and adopted the bankruptcy court's recommendation to withdraw the reference of the adversary proceeding in order to allow the adversary proceeding to be adjudicated with an ongoing consolidated class action that other investors had instituted against the insurer in the District Court for the Southern District of New York. Eventually, the trustee, insurer and other parties and classes reached a settlement that included the adversary proceeding. Later, over the plaintiff's objection, the bankruptcy court granted the trustee's motion to consummate the agreement under Rule 9019.

Then, 11 days after the Southern District approved the agreement by a 'Final Order and Judgment,' the plaintiff filed a notice of appeal and an extension of time to file a notice of appeal from the Rule 9019 Order. The bankruptcy court ruled that the notice of appeal was untimely under Rule 8002. The district court ruled that the Rule 9019 Order constituted a final order, and that plaintiff's appeal was untimely.

The Second Circuit denied the appeal, rejecting plaintiff's argument that the order was not 'final' because it required another court's approval and did not contain certain provisions of the original settlement agreement. The court noted that the issue here was whether the Rule 9019 Order was a 'final order.' In this regard, the court stated that where a bankruptcy court approves a settlement order pursuant to Rule 9019, bringing an end to litigation, this is a final order. The court recognized that the order, as entered, did not fully conform to the agreement, but 'this did not affect the Order's finality.' The court further rejected the argument that the Rule 9019 Order was not final because the agreement was contingent upon the Southern District court's entry of a final judgment approving the agreement, stating 'the entry of the 9019 Order constituted a final approval separate and distinct from the approval order issued by the Southern District Court.'

The court reasoned that while the agreement was not effective until each court approved it, 'this does not alter the fact that a 'discrete dispute' was resolved when the 9019 Order was entered authorizing the trustee to enter into the Agreement.' Where a variety of courts must all approve a settlement before it becomes effective and having finality of one court's order turn on the actions of a another court, 'the rule advanced by [the plaintiff], is a recipe for confusion. Any inefficiencies resulting from separate appeals of other court approvals of a settlement are outweighed by the need for finality of bankruptcy court orders of approval. This is so because even greater inefficiencies would be the consequence if a party could not seek review of an otherwise final bankruptcy court order approving a settlement until another court ruled, weeks, months, or even years later.'

Authorization to Enter Settlement Agreement Is a 'Final Order'

The Second Circuit has ruled that the order of a bankruptcy court approving a settlement agreement was a 'final order' under Federal Rule of Bankruptcy Procedure 9019, which triggered the 10-day period to file a notice of appeal. Ades-Berg Investors v. Breeden (In re The Bennett Funding Group Inc.), No. 05-1141 (Feb 24).

An equipment leasing company was sued by the SEC, which claimed the company was being operated as a Ponzi scheme, prompting the company to file a Chapter 11 petition. The trustee then filed an adversary action seeking the recovery of insurance proceeds from a company that insured the debtor against shortfalls in its lease collections. The lawsuit, which was transferred to the District Court for the Northern District of New York, named as defendants certain investors (the plaintiff here) and others claiming rights to the proceeds. This investor counterclaimed against the trustee, seeking the imposition of a constructive trust over the policy proceeds, and cross-claimed against the insurer.

Later, the district court approved and adopted the bankruptcy court's recommendation to withdraw the reference of the adversary proceeding in order to allow the adversary proceeding to be adjudicated with an ongoing consolidated class action that other investors had instituted against the insurer in the District Court for the Southern District of New York. Eventually, the trustee, insurer and other parties and classes reached a settlement that included the adversary proceeding. Later, over the plaintiff's objection, the bankruptcy court granted the trustee's motion to consummate the agreement under Rule 9019.

Then, 11 days after the Southern District approved the agreement by a 'Final Order and Judgment,' the plaintiff filed a notice of appeal and an extension of time to file a notice of appeal from the Rule 9019 Order. The bankruptcy court ruled that the notice of appeal was untimely under Rule 8002. The district court ruled that the Rule 9019 Order constituted a final order, and that plaintiff's appeal was untimely.

The Second Circuit denied the appeal, rejecting plaintiff's argument that the order was not 'final' because it required another court's approval and did not contain certain provisions of the original settlement agreement. The court noted that the issue here was whether the Rule 9019 Order was a 'final order.' In this regard, the court stated that where a bankruptcy court approves a settlement order pursuant to Rule 9019, bringing an end to litigation, this is a final order. The court recognized that the order, as entered, did not fully conform to the agreement, but 'this did not affect the Order's finality.' The court further rejected the argument that the Rule 9019 Order was not final because the agreement was contingent upon the Southern District court's entry of a final judgment approving the agreement, stating 'the entry of the 9019 Order constituted a final approval separate and distinct from the approval order issued by the Southern District Court.'

The court reasoned that while the agreement was not effective until each court approved it, 'this does not alter the fact that a 'discrete dispute' was resolved when the 9019 Order was entered authorizing the trustee to enter into the Agreement.' Where a variety of courts must all approve a settlement before it becomes effective and having finality of one court's order turn on the actions of a another court, 'the rule advanced by [the plaintiff], is a recipe for confusion. Any inefficiencies resulting from separate appeals of other court approvals of a settlement are outweighed by the need for finality of bankruptcy court orders of approval. This is so because even greater inefficiencies would be the consequence if a party could not seek review of an otherwise final bankruptcy court order approving a settlement until another court ruled, weeks, months, or even years later.'